BAT's Attempted Acquisition of ELFBAR and Vaping Concerns

On March 17th, British media outlet betterRetailing released a testing report on BAT (British American Tobacco). The report found that almost all major disposable e-cigarette brands in the UK exceeded their allowed limits for liquid. This includes popular brands such as ELFBAR, LOSTMARY, Found Mary, IVG Bar, Klik Klak, SMOK, SKE Crystal, and Solo. On the same day, the parent company of ELFBAR and LostMary, Shenzhen iQiyi Technology Co., Ltd. (referred to as "iQiyi"), gave an interview to 2FIRSTS.

IQIYI has disclosed for the first time that BAT had contacted them starting from August 2022 and expressed interest in acquiring details of ELFBAR.

VUSE and ELFBAR products on the shelves of a British grocery store | Source: 2FIRSTS London News Center

BAT is the second largest tobacco company in the world with a sales revenue of 27.7 billion pounds (approximately 231.5 billion yuan) in 2022. Their portfolio includes the electronic cigarette brand VUSE and the heat-not-burn product brand Glo.

ELFBAR is a leading brand in the electronic cigarette market in the United Kingdom, holding a significant share of the market for disposable electronic cigarettes.

According to the information provided by iQiyi, the process of the two parties' contact has been summarized as follows:

In August 12, 2022, a representative (unnamed) from BAT had multiple meetings with ELFBAR's manufacturer and market researcher, Miracle. On September 28, 2022, at 4:00 pm, BAT invited Miracle for a video meeting and orally expressed their interest in acquiring ELFBAR. Both parties engaged in brief communication. After September 28, BAT executives proposed to purchase the ELFBAR brand at an undisclosed price. Rumors circulated in the UK market that ELFBAR had been acquired by BAT. From November to December 12, 2022, BAT had multiple discussions with Miracle about the acquisition details. BAT executives wanted Miracle to clarify if they were willing to sell a "partial share" of the ELFBAR brand. On December 12, 2022, Miracle responded to BAT's email, stating that they had no intention of selling the ELFBAR brand.

An incident of excessive levels of tobacco in e-liquids has occurred abruptly.

On February 6th, 2023, almost two months after rejecting BAT's acquisition offer, ELFBAR was exposed by UK media outlet DailyMail for exceeding the limit of vaping oil. The incident continued to escalate, and on March 16th, BetterRetailing published an article revealing that they had received a test report from BAT indicating that a UK disposable e-cigarette product brand did not meet the standards. The media outlet also disclosed that BAT had sent the report to distributors, retailers, and law enforcement agencies in order to highlight the importance of compliance in the market.

BAT promotional brochure | Source: 2FIRSTS London News Center - BAT cannot act as an "electronic cigarette law enforcement officer".

2FIRSTS conducted interviews with relevant lawyers and industry representatives regarding this matter.

According to Tang Shunliang, a lawyer at Zhong Lun Wende (Kunming) Law Firm in Beijing, the current competitive strategy of major tobacco companies is to quickly expand their share of the new tobacco market. When they are unable to secure market share through patents, the most effective approach is to acquire small and medium-sized enterprises through distribution channels in order to gain access to end users. This impatient and results-driven behavior often leads to unsuccessful acquisition attempts, which in turn may result in unfriendly actions aimed at weakening the target company in order to gain market share.

BAT and PMI Patent Comparison | Source: 2FIRSTS

Meanwhile, BAT has a history of using "moral weaponry." For instance, in the process of suing PMI to invalidate its heated tobacco patent (CA-2021-000302) in the UK, BAT attacked PMI's patent application on the basis that it was intended to accuse more competitors of infringement. In the end, BAT emerged victorious in this case.

According to lawyer Tang Shunliang, the main reason for BAT's acquisition of ELFBAR is due to the market competition between BAT and PMI in the field of new tobacco.

BAT is looking to expand its market share in the emerging tobacco field, and acquiring ELFBAR, a leading competitor in the disposable e-cigarette sector, seems like a reasonable idea. However, the concern remains that BAT shouldn't act as the "e-cigarette enforcement police." As a competitor, purchasing the products of a rival for testing and publicizing the results could raise suspicions about their motivation and testing impartiality.

This statement is corroborated by the response of John, the chairman of the UK Vaping Industry Association (UKVIA), to 2FIRSTS. John told 2FIRSTS:

British American Tobacco (BAT) has conducted numerous tests on some of the leading disposable e-cigarette brands in the UK, and shared its findings with various institutions. Other companies have conducted similar tests, but their results differ from those of BAT's testing.

On March 17, 2FIRSTS reached out via email to relevant personnel at BAT. On March 19, 2FIRSTS received an email response from Sam Millicheap, the Director of External Affairs for BAT in the UK and Ireland. In his response, Millicheap acknowledged that they "regularly test all publicly available products in the e-cigarette category through an independent verification laboratory." 2FIRSTS noted that his response was consistent with the response given to the media outlet betterretailing.

Warning:

This article is solely intended for industrial research and does not represent recommendations for any brands or products. The brands mentioned in this article are solely used for the purpose of describing the events. Smoking is harmful to one's health. For more information, please refer to related reading materials.

Overview of the ELFBAR UK E-liquid Exceeding Safety Standards Incident

Lawyer's Op-ed: BAT Cannot Serve as Electronic Cigarette Law Enforcement Police

The British Vaping Association has stated that the test results conducted by BAT are not consistent with those carried out by other organizations.

For more related news on "Miracle", please click on the image.